Goldman investment to make Warren Buffett $1.5bn – in just two years

Warren Buffett's reputation as one of the world's canniest investors looks set
to receive its latest boost as the 'Sage of Omaha' prepares to generate a
$1.5bn (£956m) profit by selling his stake in Goldman Sachs.

Goldman investment makes Warren Buffett $1.5bn – in just two years

By Harry Wilson, Financial Services Correspondent

9:52PM BST 21 Oct 2010

The US investment bank is close to paying back the $5bn Mr Buffett invested in Goldman at the height of the financial crisis in 2008.

Berkshire Hathaway, Mr Buffett's investment company, has already received $1bn in annual dividend payments from Goldman and is now set to scoop a further $500m buyout premium when the loan is repaid. The payments mean the annual return on the two-year investment will be 12.5pc.

The precise timing of the buyback has yet to be decided and Goldman declined to comment on its plans.

Mr Buffett's investment was made in September 2008, just days after Lehman Brothers declared bankruptcy, and was seen as a major vote of confidence in Goldman at a time when the market was concerned that it could be close to collapse.

Under new US capital rules, Berkshire Hathaway's $5bn of preference shares will no longer contribute to Goldman's loss buffer and a bank source said it was now seen as "expensive" funding.